Greater returns from investments, achievable and essential

Greater
returns from investments, achievable and essential: Auckland
Council Investments

Following up on comments
regarding the forecast rate of return on equity of ACIL
owned Ports of Auckland, ACIL Chief Executive Gary Swift
today said that the anticipated rate of return of 12% was
realistic.

“ACIL has an obligation under the
establishing legislation to bring a strong commercial focus
to the business, and POAL has an obligation under the Port
Companies Act to be a successful business,” he said.

“Suggestions that the shareholder and the Auckland Council
should accept a lower return on an asset as large as the
port, is business nonsense. We need to provide a good return
to the Council to help fund essential infrastructure in
Auckland. To do anything less, results in ratepayers
subsidising the activities of POAL”.

Mr Swift confirmed
that a benchmarking report showing a comparative analysis of
returns by similar companies operating in different
countries indicated that the current rate of return on
equity by the Port was not satisfactory. The return on
equity by other ports averaged 13.6% and the range was
between 5.4% and 22.2%. “However different companies and
countries have different accounting policies, structures and
operating models, which makes benchmarking difficult,” Mr
Swift cautioned.

“The results of the POAL Board
developing a long term strategy to achieve an improved rate
of return showed that a return on equity of 12% was
realistic and achievable by 30 June 2016. This is the
minimum return the shareholder expects,” he said.

“To
achieve this return, the company undertook an in-depth
review of its structure and business, of which labour
productivity is but one aspect. An increase in labour
productivity is equivalent to a 20% increase in the
availability of berth space and defers the future need for
the port to expand. Changes are being made across the
organisation to implement the other strategies.”

Mr
Swift said that comments made about these strategies being
designed to privatise the port are incorrect. “There are
no plans to privatise the port,” he
said.

ENDS

Background: Auckland Council Investments
Limited is a Council controlled organisation, owned by
Auckland Council. ACIL owns the shares in Ports of Auckland
Limited, Auckland Film Studios Limited and 22.4% of the
shares in Auckland International Airport
Limited.

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